pricing maturity report_chemical industry
DESCRIPTION
The pricing managars who completed this survey, all have more than 3 years of experience in a pricing function, while 60% indicate that their teams worldwide comprise of more than 4, but less than 15 dedicated pricing people. Read the complete report on the pricing maturity within the Chemical Industry here.TRANSCRIPT
European Pricing Maturity2013Results and key findings - Chemical Industry
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Results and key findings - Chemical Industry
Respondents from the Chemical industry believe that they have a somewhat higher pricing maturity score than they do in reality. In reality, they come second only to the HighTech industry in terms of the highest actual pricing maturity.
The pricing managers who completed the survey all have more than 3 years of experience in a pricing function, while 60% indicate that their teams worldwide comprise of more than 4, but less than 15 dedicated pricing people.
For this group of respondents, 60% indicated that they are convinced that a dedicated price optimisation strategy is a “must have” business initiative.
80% of respondents believe that Big Data Analytics will lead to higher profit margins.
Perceived pricing maturity 2,80 = LEVEL 2
Actual pricing maturity 2,33 = LEVEL 2
Ambition within 12 months3,28 = LEVEL 3
Chemical industry – observations
2nd highest actual pricing maturity
Figure 1: Distribution of respondents within the Chemicals industry
Figure 2: Distribution of respondents within the Chemicals industry
Source : EPP European Pricing Maturity Study – 2013
Source : EPP European Pricing Maturity Study – 2013
Perception Reality Ambition
Level 1: Price list maintenance
0% 20% 0%
Level 2: Transactional control
20% 80% 20%
Level 3: Full value capturing
80% 0% 80%
Level 4: Full profit optimisation
0% 0% 0%
perception reality ambition
0%
20%
Level 1:Price List Maintenance
You try to sell anything to anyone at all prices
20%
80%
20%
Level 2:Gain transactional control
and optimize
You sell the right products to the right cutomers at the
right prices
80%
0%
80%
Level 3:Full Value Capturing
You sell segmented solutions at value based
prices
0% 0% 0%
Level 4:Profit Optimisation
You develop end-user solutions with different
revenue models
CHASM0%
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Results and key findings - Chemical Industry
Based on the gap analysis for the Chemical industry, we have highlighted a number of attention points and possible actions that will improve pricing maturity of these components of the Pricing Framework. These are based on the widest gaps between actual and desired performance.
Number 1 focus for the rest of 2013 needs to be pricing segmentation. Once the segmentation is in place, set specific pricing goals per segment (ideally also per product line, customer etc. where possible), and a targeted price positioning vs. competition.
Use price/value maps (price positioning: perceived value vs. price) to steer portfolio and price strategy, pay attention to price elasticity, move towards a better understanding of value components per segment. Consider using pricing research to help with these aspects – this is highlighted again in the Tools & Systems section where a specific need for more attention to pricing research is expressed by the respondents.
Though respondents indicate that the move towards a performance based discounting structure has already started or is at least on the table at the moment, the challenge will be in implementing it with the buy-in of the sales team, as well as the customers..
Price strategy
Price policy & setting
Discount strategy
Chemical industry – gap analysis
Source : EPP European Pricing Maturity Study – 2013
Source : EPP European Pricing Maturity Study – 2013
Reality Ambition
Price Strategy 2,45 3,60
Price Policy & Setting 2,27 3,30
Discounting strategy 2,80 3,80
Price Execution 2,27 3,10
Monitoring 2,15 3,05
System & Tools 2,10 3,10
Governance & Org. 2,68 3,52
Tendering 2,05 3,14
Figure 3: Gap analysis: Chemicals industry
Figure 4: Distribution of maturity scores across components of the pricing framework
TenderingGovernance & Org.
System & ToolsMonitoring
Price ExecutionDiscount Strategy
Price Policy SettingPrice Strategy
Actual PMI score
0.00 1.00 2.00 3.00 4.00
Gap with Ambition
1.100.84
1.000.900.83
1.001.03
1.15
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Results and key findings - Chemical Industry
60% of respondents in the Chemical industry make use of tendering. Next to price strategy, this is aspect also represents the most prominent gap between actual performance and desired level of performance for the respondents. While it seems sufficient for this industry to have the final price decision resting with the sales director instead of collaborating with the pricing director, respondents do indicate that they need to work on making complete information about the tender (item line-level) available to decision-makers in a timely manner.
Strive to offer margin improvement alternatives when possible instead of simply offering exactly what customers ask.
They also want to move to a situation where information is collected well before the tender, and is checked, critically assessed and actively used in pricing.
If you would like more information or to arrange an informal discussion on the issues raised in the EPP European Pricing Benchmark Study and how they affect your organisation, please contact:
Project Manager:Nicolene [email protected]
President & Founder of EPP:Pol [email protected]
Timely & complete information
Improve margin
Critically evaluate info
Chemical industry – Tendering